THE Insurance Regulatory and Development Authority (IRDA) would take a final decision on the demand for lifting the cap on riders on life insurance polices after ascertaining the views of the Insurance Advisory Committee. The committee constituted by the IRDA, which vets all regulations prior to them being notified, has wide representation from all quarters including consumers bodies.

"The cap on riders was placed only because of certain concerns that we had on allowing companies a free hand in offering riders. We will discuss our concerns with the advisory committee before taking a decision," the IRDA Chairman, Mr N Rangachary, said.

In its regulation on Protection of Policy-holders' Interests, the IRDA specified that the combined premium collected on all riders (additional covers on a base policy) could not exceed 30 per cent of the base policy. "The allowable rider or riders on the product shall be clearly spelt out with regard to their scope of benefit and in no case the premium relatable to all riders put together shall exceed 30 per cent of the premium on the main product," the regulation had said.

Mr Rangachary said that the move was mainly to ensure that the final benefits accruing to an insured person are commensurate with the overall premium collected by the insurance company on the policy. "If say the premium on the main product is Rs 100 and the premium on the riders substantially exceeds that amount the insurance company would be paying benefits on the premium on the main product only at the end of the policy period. Will that be fair on the buyers of life insurance," he said.

However, IRDA did not have a closed mind on the issue and that the industry's feeling would also be taken into consideration while taking a decision.

While the IRDA's move aims are protecting the policy-holders, the life insurance industry has argued that the cap in effect goes against the interest of the buyers of policies since it limits their freedom of choice. Companies argue that the cap restricts the add-on features, which in effect means that consumers would have less to choose from.

Moreover, they point out that the cap would also increase costs that the insured would incur in buying covers since for each protection one would have to buy separate policies instead of adding riders on a single base product.